The gas price projections of the ever-bullish analysts atRaymond James and Associates’ are going up in $1.25 incrementsthese days. The company boosted its Henry Hub price forecast to$5.75/Mcf for 2001 from $4.50 in reaction to what it called a”looming crisis” in the gas market. The increase puts RaymondJames’ forecast a whopping $1.62/Mcf more than the Wall Streetconsensus, according to First Call, but still about a quarter shyof the 12-month futures strip.

“Given the cold start to the winter, our model now tells us thatnormal weather from here on would leave U.S. consumers short of gasby 500 to 1,000 Bcf during the last 90 days of winter.. Even thoughthis revised forecast is well above Street consensus, we areconvinced that there is a substantial likelihood that even thisaggressive forecast will prove to be too low.”

Gas storage levels “should fall well below anything we have seenin recent history,” the firm said in its weekly report. RaymondJames calculates that given normal weather for the rest of thewinter, storage levels would have to fall to a “completelyunfeasible” -280 Bcf of working gas by April 1. “Keep in mind thatwe have never really tested the gas storage system below +600 Bcf.This means gas prices must continue to rise sufficiently throughthe second half of the winter to discourage between 5 and 10 Bcf/dof demand in the final 90 days of winter. In other words, the U.S.will likely see some form of price driven rationing of natural gasin the second half of this winter.”

However, Raymond James’ projections of storage withdrawals forthe next 13 weeks are substantially higher than the five-yearaverage. Raymond James predicts the industry will withdraw anaverage of 182 Bcf/week through the week ending March 9, but overthat period during the past five winters withdrawals have averagedonly 120 Bcf/week.

The firm’s predictions of an “unprecedented gas shortage in thesecond half of this winter” and an $8/Mcf spot price average duringthe first quarter at the Henry Hub apparently are going to requiretemperatures and storage withdrawals far exceeding those of thepast half decade.

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